Given the currency = $450 billion, deposits = $600 billion, the required reserve ratio = 10%, and excess reserves = $150 billion, answer the following parts:

a. Calculate the money multiplier.

b. If the Federal Reserve conducts an open market sale through the banking system of $200 million, by how much will the money supply change, including whether it will increase or decrease?

c. Using the Liquidity Preference Theory, what affect on interest rates would you expect to see in the short run? What effect on interest rates would you expect to see in the long run if liquidity effect is greater than the income, price level, and expected inflation effects?